Devry Final Exam

BUY Devry Final Exam

1. (TCO 1) Which of the following is true about fixed-income securities? (Points : 6)

2. (TCO 2) The concept of risk versus return _______. (Points : 6)

3. (TCO 5) Which of the following is true? (Points : 6)

4. (TCO 9) Financial leverage is _______. (Points : 6)

5. (TCO 9) Which of the following is true about a firm's WACC? (Points : 6)

6. (TCO 7) What can be said about the optimal capital structure of a firm? (Points : 6)

7. (TCO 3) Which of the following are or could be part of the buying, selling, and trading of corporate bonds? (Points : 6)

8. (TCO 9) What does the M&M Model 1 in a world of no taxes indicate? (Points : 6)

9. (TCO 6) Which is true about the normal yield curve? (Points : 6)

10. (TCO 4) Which of the following would give a good picture of the bond market? (Points : 6)

11. (TCO 8) Who would normally be required to create a portfolio investment policy? (Points : 6)

12. (TCOs 1, 8) What kind of securities would investors seeking a steady income probably look to? (Points : 6)

13. (TCO 6) Portfolio diversification is all about which of the following? (Points : 6)

14. (TCO 5) What is the normal yield curve shape? (Points : 6)

1. (TCOs 1, 8, 9) Using the security market line formula rather than the dividend discount formula, determine the expected return on a firm's common stock when:
(a) beta = 1.2
(b) the risk-free rate is 4%; and
(c) marketplace interest rates have hovered around 9%. (Points : 20)

2. (TCOs 1, 5 ,6) Calculate the appropriate selling price of a 30-year 5% coupon, $100 corporate bond that was purchased five years ago. Marketplace interest rates are averaging 8%. (Points : 20)

3. (TCO 6) Calculate the five ratios for the following company info

4. (TCO 2) Given the data below, calculate the expected return, variance, and standard deviation of the following company.

In a recessionary economy, which is expected to occur with a 30% probability, the expected returns would be -5%.

In an expanding economy with an expected probability of occurrence of 20%, the expected return would be 20%.

In a normal economy expected to occur 50% of the time, the expected return would be 5%.

(Points : 20)

5. (TCO 9) As percentage of debt on the balance sheet increases, WACC decreases while financial leverage increases, which makes EPS increase. If this is the case, why don't all firms try to end up with 99.9% debt? (Points : 20)